No Tax Rate Increases
COVID19 has certainly challenged our existence and with it brought great uncertainty and financial strain to an already battling South African economy. It was never going to be easy to deliver a National Budget Speech in this time of turmoil, but our Finance Minister, Hon. Tito Titus Mboweni certainly gave it a good go.
The term “short and sweet” best describes this budget speech. It was all over in roughly 53 minutes, probably one of the shortest budget speeches in our time.
In a nutshell, there are no tax rate increases or any proposed additional taxes for 2021. Good news for individual tax payers, as we all continue to battle the COVID19 burden and a struggling economic environment.
SA Budget 2021 Highlights
· No increases in personal income taxes
· Above inflation personal income tax relief of R2.2 bn through the adjustments to the tax brackets and rebates
· Increase of 8% in specific excise duties on tobacco and alcohol, commonly referred to as Sin taxes
· Government’s immediate priority is to support a rapid return to economic growth in the wake of the COVID-19 lockdowns
· Government will roll out a free mass COVID-19 vaccination campaign; R9 billion has been allocated in the medium term
· Budget deficit revised to 14% of GDP
· To support economic recovery, government will not raise any additional tax revenue in this budget
· Tax revenue shortfall of R213 bn
· Inflation-related increases of 15c/litre and 11c/litre proposed for the general fuel levy and the RAF levy, respectively, with effect from 7 April 2021
· The UIF contribution ceiling set at R17 711.58 per month from 1 March 2021
· Forecasted GDP growth of 3.3% expected in 2021
· Corporate tax rate lowered to 27% for companies with years of assessment commencing on or after 1 April 2022.
Where will the Tax Revenue come from
How Government will spend the 2021 Budget
· R402.9 bn on Learning and Culture
· R335.3 bn on Social development
· R269.7 bn on Debt-Service costs
· R248.8 bn on Health
· R218.8 bn on Community Development
· R208.7 bn on Peace and Security
· R207.5 bn on Economic Development
· R68.5 bn on General Public Services
· 12bn Contingency Reserve
2021 Income Tax brackets
A welcome relief with an above inflation increase to the 2021 tax brackets.
Individuals and special trusts tax rates for the period 1 March 2021 to 28 February 2022
|
Taxable Income (R) |
Rate of Tax (R) |
|
1- 216 200 |
18 % of taxable income |
|
216 201 – 337 800 |
38 916 + 26% of taxable income above 216 200 |
|
337 801 – 467 500 |
70 532 + 31% of taxable income above 337 800 |
|
467 501 – 613 600 |
110 739 + 36% of taxable income above 467 500 |
|
613 601 – 782 200 |
163 335 + 39% of taxable income above 613 600 |
|
782 201 – 1 656 600 |
229 089 + 41% of taxable income above 782 200 |
|
1 656 601 and above |
587 593 + 45% of taxable income above 1 656 600 |
Tax Thresholds and Rebates (Some good things):
|
Age |
Rebate Type |
Rebates (R) |
Tax Threshold |
|
Below 65 |
Primary |
R 15 714 |
R 87 300 |
|
Age 65 to below 75 |
Secondary |
R 8 613 |
R 135 150 |
|
Age 75 and over |
Tertiary |
R 2 871 |
R 151 100 |
Capital Gains Tax (CGT), Dividend Withholding Tax (DWT) and the Interest exemption
Some of the more common taxes applicable to a large majority of investments out there. There were no proposed changes to these taxes for the 2021 tax year. In summary:
|
Capital Gains Tax (CGT) |
Dividend withholding tax (DWT) |
Interest Exemption |
|
All Capital Gains are taxed at 40% and included in your taxable income calculation
R 40 000 annual exclusion (The gain amount under which you do not pay CGT in a tax year)
R 300 000 annual exclusion in the year of death
|
20% on all dividends received by individuals from South African companies are generally held back by the entities paying the dividends
|
If you are under 65 years old you can earn interest from a South African source up to R 23 800 p.a. without paying tax
R34 500 p.a. if you are older than 65
|
Donations Tax
A natural person can donate up to R 100 000 per year without being liable for donations tax of 20%. Donations between spouses is exempt from Donations tax.
Estate Duty
In the event of an individual’s death estate duty is applied to all property of a South African resident as well as South African property belonging to a non-resident less allowable deductions. If your total deceased estate is less than R 30 million you will pay 20% estate duty and where it exceeds R 30 million 25% estate duty will apply on amounts above R 30 million.
Transfer Duty
If you are planning to buy a property in 2021 here’s what you can expect to pay in transfer duty.
|
Value of Property (R) |
Rate |
|
0 – 1 000 000 |
0% |
|
1 000 001 – 1 375 000 |
3% above the value R 1 000 000 |
|
1 375 001 – 1 925 000 |
R 11 250 + 6% of the value above R 1375 000 |
|
1 925 001 – 2 475 000 |
R 44 250 + 8% of the value above R 1 925 000 |
|
2 475 001 – 11 000 000 |
R 88 250 + 11% of the value above R 2 475 000 |
|
11 000 001 and above |
R 1 026 000 + 13% of the value above R 11 000 000 |
Retirement Fund contributions
Amounts contributed to pension, provident and retirement annuities can be deducted within limits during a tax year to reduce your tax liability. You can even get money back if you plan smartly. The maximum retirement fund contribution an individual can make is limited to 27.5% of the greater of remuneration for PAYE purposes or taxable income (both excluding retirement fund lump sums and severance benefits). It is further limited to the lower or R 350 000 or 27.5% of taxable income before the inclusion of a taxable capital gain.
Contributions to retirement funds (Pension, Provident and Retirement Annuities) are great ways to save tax and even get something back.
Tax Free Savings Accounts
In the 2021 Tax year, natural persons can invest up to R 36 000 into a Tax Free Savings Account. The life time contribution limit remains unchanged at R 500 000. The OUTvest Tax Free Plan is a tax efficient investment vehicle in which an investor pays no tax on any growth or withdrawals from the Tax Free Plan.
Useful links to the 2021 National Budget
For the latest on the 2021 National Budget Speech visit the National Treasury’s website.
When it comes to investing, understanding the taxes you pay can help you make smarter investment decisions that could save you real money in the long run. Give one of our skilled advisors a call on 0860 688 837 or click here to learn more about tax free investing.
Gareth van Deventer CFP®
OUTvest: Head of Advice
0860 688 837
This article does not constitute financial advice and does not take into account one’s personal financial circumstances. Please contact OUTvest before implementing any financial plan or advice to ensure that you make an informed decision. Although we have tried to set out some key information to consider, we are not tax professionals and we suggest you speak to your tax consultant for any advice on your personal tax.
OUTvest is a licensed FSP. Ts and Cs apply. All our investments are exposed to risk, not guaranteed and dependent on the performance of the underlying assets.
